Figure 4-1: Collage of products. Permission: Public Domain.
Look at the images above, and list only the products that are derived from agriculture.
How many did you come up with? Which images above were not the products of the agriculture industry?
In fact, every single product in the collage is derived from agricultural production. While most of our food comes from agriculture – meat, grains, vegetables, pulses, dairy products, fish, etc. –we cannot forget about clothing, building materials, many beverages, medical products and pharmaceuticals, and of course, energy just to name a few! There are many more, and the list is growing all the time with agricultural innovation at all stages of production.
To make or produce any of the above products requires inputs or raw materials, labour, capital, and of course, land. More specifically, raw materials might be fertilizer, feed, water, and seed for example, whereas capital might be machinery, buildings, or other types of technology designed to improve the production process. The inputs together are often referred to as the factors of production and are combined using different skills and technologies throughout the production process to make outputs that are either partially or completely finished.
Producers must make many decisions during the production process to successfully produce or grow goods people want to purchase. Some decisions to consider are:
- How many workers to hire,
- How much seed to retain,
- How much herbicide to purchase,
- The amount and type of vaccines to administer,
- The breed of cattle to raise,
- The type of feed to purchase,
- How much fertilizer to apply to a crop,
- How to combine ingredients to enhance food nutrition,
- The size of a new shop, and
- The number of machines to purchase.
What else can you think of?
Each decision will have an effect on the quantity and quality of the product and whether the producer makes money because each factor of production has a cost. Labour has to be paid wages; land often comes with a mortgage; and machinery with monthly payments. These are the decisions producers must make during production, and all involve trade-offs and thinking at the margin. Next, we will look at the physical aspects of production. The financial aspects of production will be covered in the next module.